Dow slid 10, decliners over advancers 4-3 & NAZ finished down 4. The MLP index slid back to the 225s & the REIT index was off fractionally to the 371s. Junk bond funds fluctuated & Treasuries had a little buying. Oil was steady near 81 & gold finished up 10 to 2017 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Federal Reserve Governor Michelle Bowman expressed skepticism over the possibility of a digital US $, noting the multiple risks such a system could impose. A central bank digital currency (CBDC) could intrude on the privacy of users & harm the banking system while providing few benefits that aren't otherwise available for banked and unbanked consumers alike, Bowman said. “We must ensure that consumer data privacy protections embedded in today’s payment systems continue and are extended into future systems,” she added. Bowman further noted “the risk that a CBDC would provide not only a window into, but potentially an impediment to, the freedom Americans enjoy in choosing how money and resources are used and invested.” For the past few years, Fed officials have been studying whether to join a handful of other central banks to implement its own type of cryptocurrency. A study released in 2022 detailed the various pros & cons but didn't take a stance. Bowman addressed most of the common arguments, in particular, the opportunities a CBDC could present for those without access to traditional banking activities & the importance of catching up to the Fed's global counterparts that have already implemented digital currencies. The People's Bank of China, for instance, has its own product in place. However, the speech mostly noted counterarguments. For instance, she said fewer than 5% of US households are without a checking or savings account & most of that group is voluntarily unbanked. “Approximately one-third cited a lack of trust in banks as the reason for not having a bank account,” Bowman said. “I think it is unlikely that this group would find the government somehow more trustworthy than highly regulated banks.” She noted the possibility that a CBDC that would serve as a foundation that banks could use to build their own products. Also, she cited the possible use for “certain financial market transactions and processing international payments.” However, she said an interest-bearing Fed digital $ could provide harmful competition for banks, limiting their ability to lend. She also rejected the notion that a digital currency is needed to support the $, which she said is valued because of “the size of the U.S. economy, its deep and liquid financial markets, the strength of U.S. institutions, and its commitment to the rule of law,” none of which would be buttressed by a central bank digital currency.
Fed Governor Bowman casts doubt on the need for a U.S. digital dollar
Atlanta Federal Reserve Pres Raphael Bostic said he envisions the central bank approving one more interest rate increase before pausing to see how policy tightening is impacting the economy. “One more move should be enough for us to then take a step back and see how our policy is flowing through the economy, to understand the extent to which inflation is returning back to our target,” Bostic said. That 0.25 percentage point increase likely will come at the rate-setting Federal Open Market Committee's May 2-3 meeting. If a majority of the committee has the same view as Bostic, who is a nonvoting member this year, that would take the federal funds rate to a target range of 5.00%-5.25%, the highest since 2007. From there, Bostic said he thinks the FOMC can watch as the lags that come with monetary policy work their way thru inflation, employment and the broader US economic picture. “If the data come in as I expect, we will be able to hold there for quite some time,” he said. “Once we get to that point, I don’t have us really doing anything but monitoring the economy for the rest of this year and into 2024.” Markets, however, disagree that the Fed will be in a hold posture. Current pricing indicates an 87% chance of a ¼-point hike next month, a pause for a few months, then a ½ percentage point cut by the end of 2023 as the economy slows, according to CME Group estimates. Bostic said inflation is still running too strong to consider cuts. “Part of this is really about ... inflation’s returning back to our 2% target. I don’t think that’s going to happen as quickly as some of the markets do. And it seems that the question is who’s right on this?” he added. “I don’t see it coming down below maybe 3½. And 3½ is still well above our 2% target.” He also noted that he does not foresee the economy tilting into recession, even though Fed economists warned at the March FOMC meeting that a mild contraction is likely later in the year. Bostic added that tight monetary policy is likely to persist despite the recent troubles in the banking industry that are forecast to trigger the recession. He described the state of banking in his district as “stable,” though he noted that “you never know when the next shoe might drop,” adding that the Fed will remain vigilant “to make sure that we’re ready.”
Fed’s Bostic sees a quarter-point rate hike then a hold ‘for quite some time’
Bank of America (BAC) CEO Brian Moynihan said that he expects the US economy to slide into a recession later this year that is relatively minor as consumers remain in solid shape. "Everything points to a relatively mild recession given the amount of stimulus that was paid to people and the money they have left over," Moynihan said during the bank's quarterly earnings call. "At the end of the day, we don’t see the activity on the consumer side slowing at a pace that would indicate that, but we would see commercial customers are being more careful." BAC's team of economists have been warning of a recession for more than a year as a result of painfully high inflation & the Federal Reserve's aggressive campaign to raise borrowing costs. The central bank has already approved 9 straight interest rate hikes, the fastest pace of tightening since the 1980s & has opened the door to a 10th increase at their May meeting despite turmoil in the banking sector & signs of a slowdown in the economy. Moynihan said that BAC is predicting that GDP will see a contraction of 0.5-1.0% in the next 3 qtrs before it returns to positive growth. But he cited low unemployment & easing wage pressures as evidence the downturn will not be more severe. "The fact that unemployment is still 3.5% [indicates] full employment-plus," he said, adding: "And then the wage growth is slowing and tipping over. So the signs of inflation are tipping down, and it’s still there but that translates into relatively good activity. We see a slight recession, and we’ll see what happens."
Bank of America CEO: 'Everything' points to a recession this year
Gold futures finished higher, marking their first gain in 3 sessions, buoyed by weakness in the $ as investors continued to weigh the prospects for Federal Reserve interest-rates hikes. St Louis Federal Reserve Pres James Bullard reiterated his call for higher US interest rates to combat inflation & said he doesn't see a recession taking place anytime soon. Gold for Jun rose $12 (0.6%) to settle at $2019 an ounce.
Gold futures mark first gain in 3 sessions
Oil futures finished slightly higher after losing more than 2% in the previous session. Details behind China's impressive first qtr included lackluster Mar industrial output & a key German investor sentiment survey also weighed on crude, as optimism for the eurozone's largest economy gs so far far have not been a big help remains downbeat in the coming qtrs. Oil isn't getting any good news here & that means prices could continue to hover around the $80 a barrel level, or even see a tentative dip below if sellers get some help from a strong $. May West Texas Intermediate crude edged up 3¢ to settle at $80.86 a barrel.
Oil futures finish with a slight gain as traders weigh outlook for energy demand
The stock market continues to look for direction. Earnings so far have not been a big help & the early companies to report generally have the best stories. The Dow has not been able to break thru the 34K ceiling for several months. Nervous investors keep buying gold.Dow Jones Industrials
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